Economics Key Terms and Concepts

Vocabulary flashcards covering core economic terms, market structures, free enterprise principles, government roles, and economic models based on the lecture notes.

Profit motive

The incentive that drives individuals and business owners to improve their material well-being.

Open opportunity

The principle that anyone can compete in the marketplace.

Legal equality

The principle that everyone has the same legal rights.

Private property rights

The principle that people have the right to control their possessions and use them as they wish.

Voluntary exchange

The principle that people may decide what, when, and how they want to buy and sell.

Interest group

A private organization that tries to persuade public officials to act in ways that benefit its members.

Patriotism

Love of one's country.

Eminent domain

The right of a government to take private property for public use.

Public disclosure laws

Laws requiring companies to provide information to consumers about their products and services.

Laissez faire

Doctrine that the government generally should not intervene in the marketplace.

Private property

Property owned by individuals or companies and not by the government or the people as a whole.

Intellectual property

Creations such as books, songs, or movies that individuals have created.

Mixed economy

An economic system that has some market-based elements and some government involvement.

Economic transition

A period in which a nation moves from one economic system to another.

Privatization

Selling enterprises operated by the government to individuals.

Centrally planned economy

An economic system where the government, rather than individual producers and consumers, answers the three basic economic questions via a central bureaucracy.

Command economy

Economic systems that operate in direct contrast to free market systems.

Socialism

A range of economic and political systems based on the belief that wealth should be evenly distributed throughout the society.

Communism

An economic system in which the central government owns and controls all resources and means of production and makes all economic decisions.

Authoritarian

A form of government where governments limit individual freedoms and require strict obedience from their citizens.

Karl Marx

Economic thinker who believed that capitalism was the exploitation of workers and unfair distribution of wealth, emphasizing equity under communism.

Market specialization

The concentration of the productive efforts of individuals and businesses on a limited number of activities.

Free market economy

An economic system where answers to the three basic economic questions are made by voluntary exchange in markets through choices made by individuals.

Factor market

The market arena where firms purchase factors of production from households, and households exchange labor for money from firms.

Product market

The arena in which households buy the goods and services that firms produce.

Adam Smith

Economist who described how markets function through individual transactions where buyers and sellers consider only their own self-interest.

Incentive

The hope of reward or fear of penalty that encourages a person to behave in a certain way.

Consumer sovereignty

The power of consumers to decide what gets produced based on their economic choices.

Invisible hand

The phenomenon described by Adam Smith where self-interest and competition work together to keep the marketplace fair and prices responsive.

Economic system

The structure of methods and principles a society uses to produce and distribute goods and services.

Factor payments

The income people receive in return for supplying factors of production—land, labor, and capital.

Profit

The amount of money a business receives in excess of its expenses.

Safety net

Set of programs to protect people who face unfavorable economic conditions such as layoffs, injuries, or natural disasters.

Standard of living

Level of economic prosperity.

Traditional economy

An economic system that relies on habit, custom, or ritual to answer the three basic economic questions.

Innovation

The process of bringing new methods, products, or ideas into use.